Natural Gas Nation: The demand side

Large price swings in the market have deterred natural gas demand, but opportunities exist to spur activity in areas like transportation and electricity generation.

Still, what happens in Washington on issues such as climate change could also play a significant role, according to panelists at “Natural Gas Nation” who talked today about natural gas demand during a daylong natural gas conference at Southern Methodist University.

In one respect, Washington is already more interested in other technologies gaining prominence (wind and solar) than in natural gas, at least one expert noted.

States must become more engaged with the EPA and Washington on climate change regulations, said C. Boyden Gray, a partner with Gray & Schmitz LLP, a Washington law firm. Gray also served as U.S. ambassador to the European Union in Brussels from 2006-2007 and was White House counsel during George H. W. Bush’s administration. Gray noted how gasoline-powered vehicles play a large part in fine particle pollution, but the EPA currently doesn’t allow states to do regulate them.

On the transportation side, Bill Kahn, manager of Advanced Concepts for Peterbilt Motors, said the trucking company has developed natural-gas operated engines, but challenges remain. A natural-gas powered 18-wheeler can only go 600 miles between fuelings, compared to 1,200 miles for a diesel-powered truck, he said.

How much of the transportation business that the natural gas industry might ultimately capture is up for debate. Already, worldwide there are 10 million vehicles on the road that are powered by natural gas — many of those are taxicabs in Third World countries, experts said.

Peter Huber, co-author of “The Bottomless Well,” and partner in the Washington, D.C., law firm Kellogg, Huber, Hansen, Todd, Evans, and Figel, concurred. Huber’s pedigree includes serving as a senior fellow at the Manhattan Institute and as a contributor to Forbes.

“Is the best thing we can say about natural gas that it’s better than coal?” he asked. Fickle Washington politicos already are looking to the next big thing, he said. In addition, coal can beat natural gas on a price basis. “On a BTU to BTU basis, coal is here to stay,” he said.

John Young, president and CEO of the the utility Energy Future Holdings, said that the nation’s older coal plants are being retired due to the recession and sagging demand. Still, from a carbon perspective, there isn’t much difference between an old coal plant and a new coal plant, he said. The nation’s 325,000 megawatt coal fleet is likely as big as it will get, Young noted, predicting that coal utility plants are “on the way down.”

Natural gas, Young said, can fill the gap for utilities as the nation considers a return to more nuclear power.

Several panelists concurred, however, that a lot of the demand for natural gas going forward will depend not on entrepreneurs and producers, but on the political climate in Washington.